USPS fears package growth slowdown ahead of Postal Task Force report

Best listening experience is on Chrome, Firefox or Safari. Subscribe to Federal Drive’s daily audio interviews on Apple Podcasts or PodcastOne.

The Postal Service posted a $1.5 billion net loss for the third quarter of fiscal 2018, just a day before the White House’s Postal Task Force will deliver its report to President Donald Trump.

An increase in revenue this quarter helped avoid a more severe net loss. USPS reported $17.1 billion in total revenue, a 2.4 percent increase from the same period last year.

Advertisement

Revenue for first-class mail, one of USPS’ most profitable products, declined by $134 million, or 2.2 percent, while marketing mail revenue increased by $63 million, or 1.6 percent.

Postmaster General Megan Brennan said Thursday that increased competition in the package business has slowed the rate of its package growth.

“We operate in a highly competitive delivery marketplace. We’ve got established players and a variety of startups, so we compete for business every day,” Brennan said in a conference call with reporters.

USPS reported $5.1 billion in shipping and package revenue this quarter, an increase of 10.2 percent. while its package volume increased by 7.5 percent, or 102 million packages, this quarter.

Joe Corbett, the Postal Service’s chief financial officer, said new entrants to the package business could make it difficult for the agency to see the same rate of growth it’s been seeing.

“We expect growth to continue, but we think that the years of double-digit growth are going to be difficult to get back to, given the level of competition,” Corbett said.

Postal Task Force to brief Trump Friday

A Treasury Department spokesman told Federal News Radio that the Postal Task Force, headed by Treasury Secretary Steve Mnuchin, would brief Trump on its recommendations for restructuring USPS’ business model this Friday.

The president established the task force in April through an executive order he signed in April.

However, the White House announced in June, as part of a sweeping government reorganization plan, that it would seek to privatize the Postal Service.

Despite the looming threat of privatization, Brennan said USPS welcomes the task force’s input to put the agency on a firmer financial footing.

“As we’ve said repeatedly, business model problems need to be addressed. The task force does provide an opportunity to consider these important public policy issues, so we look forward to the continued discussion as we move forward in this process,” Brennan said.

Since April, USPS has cooperated with the task force and provided them with extensive data and analysis. Brennan declined to speculate on details about the upcoming report.

While the task force addresses broader public policy concerns, Brennan emphasized the urgent need for Congress to enact pending postal reform legislation.

“We’ll continue to work with both the House and the Senate to advance the pending legislation that provides some essential reforms that would immediately improve our financial condition,” she said.

House and Senate lawmakers have proposed several postal reform bills over the last few years. Each bill seeks to eliminate a requirement that USPS pre-fund health benefits for future postal retirees by requiring postal retirees to enroll in Medicare.

Over the last decade, the agency defaulted on tens of billions of dollars in scheduled payments to the retirement fund.

Shortly after the Trump administration released its government reorganization plan, members of the House Oversight and Government Reform Committee pushed back against plans to sell off the Postal Service.

Coming soon: Board of governors confirmations

On other postal reform fronts, Brennan urged the Postal Regulatory Commission to allow USPS to raise its stamp prices beyond the rate of inflation, which would be the biggest change in postal prices in nearly 50 years.

“A favorable outcome of the PRC’s 10-year pricing system review is urgently needed. That also will provide some additional financial stability and permit us to respond to market forces,” Brennan said.

Under the PRC’s proposed rule, the Postal Service would be allowed to raise the price of each class of mail by 2 percent each year for the next five years.

A statutory price cap applies to USPS’ market-dominant mail products, which generate roughly 70 percent of its total revenue.

Fredric Rolando, president of the National Association of Letter Carriers, also called on the PRC to allow greater pricing freedom.

“At present, USPS is constricted in its ability to adjust rates by no more than the Consumer Price Index, but the CPI is an economy-wide measurement of consumer goods and services that doesn’t fit a transportation and delivery provider. The PRC has the ability to correct this mismatch and relieve the resulting financial pressure,” Rolando said in a statement.

The PRC stopped receiving public comments on April 30 about the proposed rule to adjust the price cap.

Brennan also expressed optimism that two of Trump’s nominees for USPS’ board of governors —David Williams, a former USPS inspector general, and Robert Duncan, chairman of the President’s Commission on White House Fellowships — would be confirmed “in the coming weeks.”

A third nominee, Calvin Tucker, the managing partner of a financial services consulting firm, has not yet been voted out of the Homeland Security and Governmental Affairs Committee.

The nine-member board, which sets long-term business decisions for the Postal Service, hasn’t had any presidentially confirmed members since 2016. The postmaster general and deputy postmaster general also sit on the board.